Beam Suntory’s Greg Hughes On The Opportunity In Premium Premixed Cocktails
September 3, 2020Yesterday, Beam Suntory announced the acquisition of premium premixed cocktail player On The Rocks for an undisclosed sum.Ahead of the announcement, SND executive editor Daniel Marsteller spoke with Beam Suntory North America president Greg Hughes to hear more about the deal and discuss the outlook for spirits in general amid a turbulent year in the U.S. market.
SND: Before we get to the acquisition, set the stage with what you’re seeing in the spirits market generally. How do you assess the current situation?
Hughes: The way I would describe it is stable instability. The on-premise has obviously been very challenged, especially in Q2, and then there’s the instability of reopening and then in some cases reclosing again. So overall we’re seeing the on-premise down roughly 50%. The off-premise has been really resilient, up in the low teens range, netting to a flattish total market. Given that our footprint is in categories that are growing, we’re seeing growth in the low single digits. And I think that’s probably where the year will end up, but with the caveat that predicting beyond next week in this market has been challenging to say the least.
SND: Why was On The Rocks the right partner to foray further into premixed cocktails?
Hughes: Patrick Halbert and Rocco Milano and their team really pioneered this premium premixed cocktails category. They started with the idea that people want a bar-quality cocktail in places where there’s no bartender to deliver it, beginning with places like hotel mini bars, airlines, and stadiums. Now that trend has been further amplified with the emergence of the “home premise.” At-home cocktailing and cocktails to-go have obviously accelerated, and we think that will be long-lasting. In 2017, they reached out to us to supply spirits for their cocktails. We ended up co-branding those cocktails and taking an equity position and board seat. We’ve been following their exciting growth, and now seemed like the right time (to make this move). We’re the leader in spirits-based RTDs in Japan, and we have leading positions in Australia and Germany. As the category starts to take off in the U.S., our ambition is to be the leader in our largest market as well, and this acquisition gives us the platform to build from.
SND: How expansive is the brand’s distribution footprint?
Hughes: It’s nationally distributed, with Southern Glazer’s as their main open and control state partner. They also have a footprint in the franchise markets. They started in Texas, so that’s a strong market. But there’s still a ton of distribution opportunity because they started primarily in the on-trade. They’ve seen incredible growth in the off-premise, but there’s still a lot of distribution upside, and with our scale we can help close out some of those gaps.
SND: Do you foresee expanding the On The Rocks range?
Hughes: They have six cocktails today, but there’s obviously a wide array of core cocktails that consumers love, and that our brands are a great fit with, so we see a huge opportunity for innovation, whether it’s with high-proof spirits, low-abv, no abv, or sparkling cocktails.
SND: What’s the scale of the brand now, and where is it likely to end up in the months ahead?
Hughes: Their trailing 12 months is about 130,000 9-liter cases and they’re on a fairly aggressive growth trajectory, so I’d expect it will be a bit more than that by the end of the year. We believe the total premium spirits-based RTD category could get to 2 or 3 million cases by 2025, and we want to be the leader.
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